Housing Agency Provides First Loan Guarantees For Rural Development

TIOGA, ND – TheNorth Dakota Housing Finance Agency (NDHFA) issued Guarantee Certificates on Thursday to The Bank of Tioga for three construction loans. The guarantees are the first backing provided by the Agency through a pilot program that supports lenders who finance speculative affordable single-family housing construction in rural North Dakota.

“Community leaders come to us regularly saying that they have a difficult time attracting housing developers and that lenders are reluctant to assume the full risk of providing construction lending in rural areas,” said Mike Anderson, NDHFA executive director. “North Dakota Housing’s program mitigates the risk.”

NDHFA’s loan guarantees are limited to the lesser of 50 percent of the potential net loss or $68,000 per home. This allows for a guarantee of up to 50 percent on total construction costs (including land) on loans of $160,000 or less. The guarantees provided to the Tioga bank range from $67,575 to $68,000.

“Everyone involved in the project is eager to proceed,” said David Grubb, The Bank of Tioga president/CEO. “Demand for housing in our community is strong, and I believe this project will serve as a catalyst for further development.”

The Tioga Housing Authority owns the lots in the Carlson Subdivision on which four modular homes will be set. The ranch-style homes are three-bedroom, two-bath. They will be placed on full basements and have attached garages that will be built on-site.

“This financing tool is a way for our rural communities to be able to provide the type of homes desired in the current market,” said Jolene Kline, NDHFA planning and housing development director. “Without appropriate housing, it is nearly impossible for North Dakota communities to grow their workforce, or retain their population.”

Active guarantees through the Agency’s program are limited to three per contractor and five per community at any given time. The lender or contractor must demonstrate that a need exists for additional affordable housing in the community and the local governing body supports the development.

“The Housing Authority believes that at least one of the homes will be sold immediately. Upon closing, the Bank will pursue a Guarantee on the fourth home,” said Grubb.

Use of NDHFA’s construction loan guarantee program is limited to the financing of single-family homes in rural communities with a population of less than 5,000. During the 2007 Legislative Session, NDHFA was authorized to assist communities in addressing unmet needs including providing financial assistance for land development and loan guarantees.

“North Dakota Housing offers multiple resources to conduct housing market surveys, offers development and rehabilitation financing, and can also provide technical assistance,” said Kline. “We advocate an approach that looks at the housing demands of all members of the community and create a strategy from there.”

For more information about the resources available, contact Jolene Kline at (701) 328-8080, (800) 292-8621, (800) 366-6888 (TTY) or info (at) ndhfa (dot) org.